Feds Say Alameda County Ambulance Contract Involved Illegal Kickbacks

County in process of settling federal lawsuit, says employees never received any money from Paramedics Plus.

Alameda County is in the process of settling a federal lawsuit regarding alleged kickbacks related to its ambulance contract, according to court records and county officials.

Paramedics Plus' contract with Alameda County was forged in November 2011. The feds allege that the company agreed to a 7 percent "profit cap" on its local earnings, and that revenue exceeding this cap would be returned to Alameda County, in what prosecutors describe as an illegal "kickback" profit-sharing model.

This alleged scheme helped Paramedics Plus unfairly secure multimillion-dollar emergency-medical contracts here and throughout the country, according to the feds.

Alameda County's settlement, which has yet to be filed in a Texas federal court, stems from a 2014 whistleblower lawsuit. The details of the settlement are not yet available, but sources close to the case say Alameda County has agreed to pay a fine and remove “profit cap” provisions from its ambulance contracts.

Stephen Dean, former chief operating officer for Paramedics Plus’ Oklahoma office, filed the suit, under whistleblower law, on behalf of the U.S. government. The complaint remained under seal until January of this year, when the U.S. attorney’s office in East Texas filed its own against the company in federal court.

Under the profit-cap model, any revenue earned by the company on ambulance services over a set amount was to be shared with local governments. This was originally used to win lucrative ambulance contracts in Tulsa and Oklahoma City. Later, the company “offered similar kickback deals to public entities in California, Florida, and Indiana,” according to prosecutors.

Alameda County is currently the sole contract Paramedics Plus has in California.

When Alameda's contract began in November 2011, it ended the county’s nearly two-decade-long contract with American Medical Response.

The five-year contract has been extended several times. Its current and final extension — which the board of supervisors approved last month — ends on November 1, 2017.

Last year, Alameda County officials decided to open up their ambulance contract to competitive bidding. Paramedics Plus filed a letter of intent to submit a bid. But in October, the bidding process was suspended, for unknown reasons.

The head of Alameda County’s health-care agency said they will reopen the contract again before the end of the year, however.

‘Kickbacks’ Built Into Contracts From the Start

Paramedics Plus was formed in East Texas in 1998 to bid on public ambulance services, and according to federal prosecutors its first contract was valued at more than $100 million.

This agreement included a “profit cap” that would return any revenues more than 12 percent of Paramedics Plus’ gross income back to the governing body that issued the contract.

Federal authorities allege Paramedics Plus’s initial contract in Oklahoma earned a net revenue of $250 million in five years. The company also made cash payments and political contributions to elected officials in charge of the ambulance contracts in Tulsa and Oklahoma City.

Alameda's contract contained a 7 percent “profit cap.” From the beginning of the contract to when Dean filed his complaint in April 2014, Paramedics Plus grossed $90 million in Alameda County, $54 million of which for providing services to the county, the lawsuit states.

“Thus, as a result of Paramedics Plus’s scheme, the system became a pay-to-play one, in which emergency services companies must be willing to kickback their profits to ambulance authorities in order to provide emergency ambulance services,” the whistleblower complaint states.

However, Alameda County Health Care Services Agency acting director Rebecca Gebhardt claimed that Paramedics Plus never made a profit in the county. As part of the expected settlement, she said the county must remove the "profit cap" from its contract, but that “the removal of the profit cap provision has had no practical or monetary impact.”

Asked if any county employees acquired kickbacks from Paramedics Plus, Gebhardt said that, to her knowledge, no county employee "ever received money from [Paramedics Plus] or the parent company, except the funding related to contract requirements, for example, response time fines and penalties.”

Because of the settlement, Alameda County isn’t listed in the latest version of Dean’s lawsuit. Pinellas County, Florida, also settled for an undisclosed amount of money.

Asking for the Money Back

Due to unexpectedly high fees, Alameda County’s ambulance contract turned out to be a losing business.

According to Paramedics Plus’s original bid in Alameda County, the company also to pay “an annual First Responder support fee” of $4.6 million to fire departments in Alameda County.

Dale Feldhauser, who took over as chief operating officer for Paramedics Plus in Alameda County in 2013, says the First Responder Support Fees payable to Alameda County have since been negotiated out of the contract extensions. The latest involves $3 million in such fees.

Paramedics Plus twice went before the Alameda County Board of Supervisors in 2015 to request one-time payments to offset unexpected expenses.

The first instance was at the board’s June 30, 2015, meeting, where the supervisors were asked to authorize a one-time payment of up to $5 million to Paramedics Plus. During the meeting, District 4 Supervisor Nate Miley recused himself, because his daughter, who lived with him at the time, was an EMT with the company. Miley has also accepted more than $4,000 in campaign contributions from Paramedics Plus. He could not be reached for comment for this story.

“You’re getting off easy today, supervisor,” fellow Supervisor Scott Haggerty said to Miley, who flashed a smile before exiting the meeting.

Paramedics Plus also made political contributions to Supervisor Wilma Chan’s state Senate campaign in 2015, and to District Attorney Nancy O’Malley’s 2018 campaign committee.

Then-Alameda County EMS director Fred Claridge defended the request to pay Paramedics Plus as part of an “attempt to stabilize” emergency services with the county “based on some hard lessons we’ve learned over the years.”

“I don’t consider myself a shill for Paramedics Plus,” Clairidge said, without provocation. “I consider myself an advocate for an EMS system. I think they’re doing a good job considering the fact they’ve lost a considerable amount of money.”

Supervisor Keith Carson, the deciding vote in 2015, questioned Paramedics Plus president Ron Schultz, who said contracts in Indiana and Florida had turned a profit that year. Ultimately, Carson voted against giving Paramedics Plus the requested $5 million, because of the county’s other outstanding debts.

Schultz said twice that the decision not to pay his company the extra money “catches me off guard.”

“You might as well throw grandma in the trunk and drive her to the hospital,” said Haggerty, who supported the payments. “And that scares me.”

The following month, at the request of then Health Care Services Agency head Alex Briscoe, the board approved a “one-time augmentation of $4,000,000” to Paramedics Plus. Briscoe, who took a leave of absence from his position that December and no longer works for the county, did not respond to an email requesting comment for this article.

Attorneys for Paramedics Plus have filed a motion to dismiss Dean's lawsuit against them. But on March 31, the company announced it was up for sale.